It's now more difficult than ever to get a car loan -- and that's hurting car dealers as much as consumers.
Reuters reports, "GMAC, the finance company affiliated with General Motors Corp, said on Monday it would pull back from riskier and longer-term auto lending in response to tight credit conditions that has limited its access to funds. GMAC said it would be more conservative in extending car loans, restricting them to U.S. consumers with good credit and to shorter terms." GMAC said in a statement, "The changes include limiting purchases to contracts with a credit score of 700 or above."
According to the New York Times, the mean credit score in the U.S., until recently, was "roughly 720." Fair Isaac Corporation, the consulting service that designed the FICO credit score the lending industry uses to evaluate creditworthiness, wrote its formula with that target in mind. However, "that number will probably drift a bit lower in the coming months," as the credit crisis spreads. It isn't clear what the average credit score is today, or what it will be in six months. The Times adds, "The minimum credit score required for the very best rate" on a car loan "was 786 at the end of September according to CNW Market Research, up from 741 a year ago."
The move hurts buyers in the market for a new car, but it may hurt car dealerships more. Reuters notes, "U.S. auto sales for September sank to a 15-year low, with automakers reporting that the financial crisis had made consumers less willing to make big purchases and left many remaining car shoppers unable to secure financing. Industry executives and auto analysts have said they are not seeing any rebound in U.S. auto sales so far in October."
Source: http://usnews.rankingsandreviews.com
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